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AT&T suffers court setback over Kentucky U-verse deployment

Mediacom Southeast's fight to stop AT&T (NYSE: T) from deploying its U-verse TV service in Kentucky under an 1886 perpetual telephone franchise earned an--admittedly--small victory in court earlier this month when the Sixth Circuit Court overturned a lower court's ruling that granted AT&T's request to dismiss the case.

The city of Hopkinsville and the Kentucky League of Cities initiated the case in 2009 when AT&T sought to deploy U-verse.

The cities contended AT&T needed a new franchise agreement with each municipality to deploy U-verse over its telephone lines and argued the 1886 franchise issued by the state didn't cover the new technology. AT&T settled with the city and asked the District Court for the Western District of Kentucky to dismiss the case.

Following the dismissal, Mediacom, an incumbent provider in Hopkinsville, stepped in and challenged, using the same argument the cities had used--AT&T's 1886 franchise did not permit it to use its existing access to rights-of-way to offer U-verse video service and AT&T must obtain a cable television franchise from Hopkinsville. AT&T filed a motion to dismiss Mediacom's amended intervening complaint, arguing that AT&T was not required to obtain a new license prior to offering U-verse video service because this service fell within the scope of its existing Commonwealth-wide telephone franchise.

The 1886 franchise originally was granted to BellSouth Telecommunications. It allowed BellSouth to "purchase, construct, maintain and operate, within this State and elsewhere, telephone lines, exchanges and systems, and to conduct all the business incident and pertaining thereto," and to "construct, equip and maintain telephone lines along, over or under the highways, streets and alleys, and across any water-course within this Commonwealth, so as not to obstruct the same."

The District Court's ruling was in line with a conclusion from the state's attorney general, who in 2008 wrote that AT&T's perpetual license permitted it to "provide IP [internet protocol] video services within its existing rights-of-way without securing additional authorizations."

The Circuit Court's ruling is primarily procedural; it said the District Court erred by granting a dismissal before sufficient discovery, with an adequate factual record. It also said the court placed the burden of proof wrongly on Mediacom and erroneously relied on a written agreement between the city and AT&&T to make its decision.

The Circuit Court concluded that a major question was left unanswered: "The question of how to characterize AT&T's new video service is not as clear-cut as AT&T contends. Is AT&T's U-verse video service a mere evolution of its two- way telephone communication services, or is it conceptually different, and more akin to one-way cable television service?...The video component of U-verse may or may not fall within the rubric of AT&T's perpetual telephone franchise."

For more:- see the full text of the Sixth Circuit Court's ruling here: - see this Bloomberg BNA report - see the Squire Sandersbrief (sub. req.)